Key Short Interest Changes in Defensive High-Yield Dividend Stocks

The short interest data is out for the July 31 settlement date. We often review the higher-yield defensive dividend stocks for a barometer of what short sellers may be thinking. The trends are rarely uniform, but there were some serious changes observed in some of the short interest readings when compared to the July 15 settlement date and prior periods.

The interesting point about short sellers betting against defensive high yield dividends is that this requires a unique approach to short selling. After all, short selling a high dividend stock takes much more conviction and courage versus short selling growth stocks or other stocks that have no dividends. On top of being short a stock and having to pay borrowing costs to a brokerage firm, the short sellers are effectively assuming the liability of paying that dividend out on top of just the cost of borrowing a stock.

Altria Group Inc. (NYSE: MO) is down again in its short interest, with the July 31 settlement short interest at 18.948 million shares versus 20.072 million shares short as of July 15. Altria’s yield is now about 4.5%, and the stock is still down almost $2 from a 52-week and all-time high.

AT&T Inc. (NYSE: T) had previously seen an upward trend in its short interest, but short interest actually dropped to 196.9 million shares as of the July 31 settlement date from 199.9 million shares short in the prior report. While the level of short interest remains elevated, it was a reversal. AT&T’s dividend yield is at 5.2%, and the stock is right in the middle of its 52-week trading range.

General Electric Co. (NYSE: GE) previously had declines in the short interest, but short interest popped back up in the July 31 settlement date to 67.2 million shares short from 58.1 million shares in the previous report. Before that, there were 60-plus million and 70-plus million short GE shares. GE’s common stock dividend yield is 3.3%, and the stock price has bounced recently even if it is way down from a recent peak of $28.09.

Kimberly-Clark Corp. (NYSE: KMB) saw a modest drop yet again in the short interest, falling to 6.253 million shares as of July 31 versus 6.406 million shares short as of July 15. This is not the lowest short interest of 2014, but it is lower than the average for the year. The consumer products giant’s dividend yield is now back down to about 3.0% with shares around $108 as of Monday.

Merck & Co. Inc. (NYSE: MRK) saw its second drop in the short interest, but it was very small. Short interest was 33.501 million shares short as of July 31 versus 33.982 million shares short as of July 15. Merck’s dividend yield is right at 3.0%, but the $56.73 price is down more than $3 from its recent peak.

Pfizer Inc. (NYSE: PFE) has seen volatility and jumps in the short interest of late, but this latest reading was the highest of 2014 by far. The July 31 short interest was 72.619 million shares versus only 60.916 million shares as of July 15 — a short interest gain of nearly 20%. Pfizer shares have sunk back under $30 by quite a bit, even testing $28 in recent days.

Procter & Gamble Co. (NYSE: PG) saw its short interest fall by more than 2%, down to 25.165 million shares as of July 31 versus 25.763 million shares as of July 15. P&G’s dividend yield is 3.2%, and shares have come climbed back above $80 and have even come close to $82 in recent trading.

Verizon Communications Inc. (NYSE: VZ) had been very dull in its short interest trends — up until this report. Verizon short interest rose almost 9% to 40,604,743 shares as of July 31 versus 37,276,496 shares as of July 15. Verizon’s dividend yield is currently 4.3%, and its stock has now slid back to the middle of its 52-week range as well.